Budget 2021 Updates

Finance Minister Nirmala Sitharaman listed Health & well-being,     Physical & financial capital & infrastructure,    Inclusive development for aspirational India,    Reinvigorating human capital,     Innovation & R&D, and     Minimum Govt & Maximum Governance as the main pillars of Budget 2021.

The highlights of budget 2021 announcements are as under:

TAX RULES FOR INDIVIDUALS:

• No changes in income tax rules, slab rates, exemptions provided to individuals in the budget 2021-22. Last year’s announcement ushered in a new tax regime where the taxpayer got the option of taking new rates without exemptions or sticking to old rates with exemptions. Same rules continue apply to tax payers of FY 2021-22 (AY 2022-23).
• Senior citizens above 75 years of age with only pension income will be exempted from filing tax returns. Banks paying the interest would deduct the tax on their behalf.
• To further ease filing of IT returns, details of capital gains and interest from banks, post offices, etc will be pre-filled
• The government has proposed to allow tax exemption on maturity of ULIP having annual premium up to Rs 2.5 lakh.
• EPF interest income above Rs 2.5 lakh will be taxable.
• Dividend payment by REITs ((Real estate investment trusts) and InvITs (Infrastructure investment trusts)  not subject to TDS
• Advance tax liability to arise only after payment of dividends
• In order to remove the genuine hardship faced by the NRIs in respect of their income accrued on foreign retirement benefit account due to mismatch in taxation, it is proposed to notify rules for aligning the taxation of income arising on foreign retirement benefit account.
• Giving a fillip to the buyers of affordable houses, the time period of taking loans to buy such houses by one year – i.e. from March 31, 2021 extended to March 31, 2022 – to avail additional tax benefits of Rs 1.5 lakh u/s 80EEA of the Income Tax Act. By buying an affordable house, a tax payer may avail tax benefits up to Rs 3.5 on interest paid on home loan taken to buy such a house. To be qualified as an affordable house, the carpet area of the house property should not exceed 60 square meter (645 sq. ft.) in metropolitan cities of Bengaluru, Chennai, Delhi National Capital Region (limited to Delhi, Noida, Greater Noida, Ghaziabad, Gurgaon, Faridabad), Hyderabad, Kolkata and Mumbai (whole of Mumbai Metropolitan Region).    In other cities and towns, the carpet area should not exceed 90 square meters (968 sq. ft.).
• The reassessment will be opened for 10 years only if evidence of concealment of income of Rs 50 lakh or more in a year will be found. In serious tax evasion cases, only where there is evidence of concealment of income of Rs 50 lakh or more in a year, can reassessment be opened for 10 years. For others, assessment reopening only for 3 years.
• In order to remove the genuine hardship faced by the NRIs in respect of their income accrued on foreign retirement benefit account due to mismatch in taxation, it is proposed to notify rules for aligning the taxation of income arising on foreign retirement benefit account
• Foreign portfolio investors to get deduction of tax on dividend at a lower treaty rate
• Proposed to make I-T Appellate Tribunal Faceless
• Tax audit threshold raised FROM Rs 5000 crore to Rs 10,000 crore for digital transactions

BANKING   RECAPITALISATION:

The FM announced Govt plans to allot Rs 20,000 crore for bank recapitalisation of PSBs.

DEFINITION OF SMALL COMPANIES:

The FM also proposed to revise definition under Companies Act, 2013 for small companies by increasing their threshold for capitalization. FM says definition of small companies to be revised by raising capital base to Rs 2 cr from current limit of Rs 50 lakh.

MSME ALLOCATION:

The FM proposed doubling of MSME allocation, setting aside Rs 15,700 crore for medium and small enterprises in FY22.

PF CONTRIBUTION BY EMPLOYER:

Late deposit of employee’s contribution to PF by employers will not be allowed as deduction to employer: FM

REMOVAL OF GST ANAMOLIES

GST to be made smoother by removing anomalies

TAX AUDIT:

Threshold for tax audit proposed to be increased to Rs 10 cr for those transacting 95 per cent digitally

CAPITAL EXPENDITURE

FY22 capital expenditure provided is up 34.5% (vs FY21 BE) at Rs 5.54 lakh crore (Capital expenditure for FY 2021 is seen at Rs 4.39 lakh crore),  Out of the above provision Rs 44,000 crore under capital expenditure will be given to Department of Economic Affairs in FY22.

FISCAL DEFICIT AND DIVESTMENT TARGET

Fiscal deficit estimated at 9.5% of GDP for 2020-21. The Govt sees the FY22 fiscal deficit at 6.8%, according to the FM, while she had pegged the deficit at 3.5% for FY21 in the last Budget.  According to Budget documents Govt aims to get Rs 1.75 lakh crore through divestments in 2021-22. In FY21, it planned to raise Rs 2.1 lakh crore through divestments, falling short.

After an estimated 7.7 per cent contraction in 2020-21, the Finance Ministry’s Economic Survey projects that India’s real GDP would record a growth of 11 per cent in 2021-22. The nominal GDP growth has been estimated at 15.4 per cent, implying an assumption of 4.4 per cent inflation during the year.

AMENDMENTS TO INCREASE FDI LIMIT IN INSURANCE AND ALLOWING FOREIGN OWNERSHIP

FM proposed to consolidate provisions of the SEBI Act, Depositories Act, Securities Contracts Regulation Act, and the Government Securities Act. Government aims to amend Insurance Act to allow higher FDI, increasing FDI limit in insurance to 74% from 49% and allowing foreign ownership.

TAX HOLIDAY FOR START-UPS, IFSC AND AIRCRAFT LEASING BUSINESS:

• Tax holiday for start-ups  extended by one more year,
•  A tax exemption for relocating funds to IFSC,
• Tax holiday for aircraft leasing business in Gift city.

REVISED CUSTOM DUTY STRUCTURE

FM Propose to review more than 400 old exemptions to customs duty and from October 1 will put in place a revised customs duty structure free of any distortion. Govt. also plans on reducing customs duty uniformly to 7.5% on products of non-alloy, alloy and stainless steel, exempting duty on steel scrap till March 2022. The FM added that to provide relief to copper recyclers, the Govt. will be reducing duty on copper scrap from 5% to 2.5%.Customs duty on solar lanterns cut to 5%.Customs duty on some auto parts to be raised to 15%:

TEXTILE PARK

India will set up seven textile parks over three years under the scheme of mega investment textile parks which was announced in Budget FY22. The parks to be setup over 1,000 acres of land with world class infrastructure, and plug-and-play facilities, will be addition to the Rs 10,683-crore production linked incentive (PLI) scheme for technical textiles and manmade fibres.

AGRICULTURE CREDIT

The Budget set agriculture credit target of Rs 16.5 lakh crore for FY22, and further increases provision to rural infra development fund to Rs 40,000 crore from earlier Rs 30,000 crore. FM said that the Govt, is committed to welfare of farmers, pointing at how FM pointed out that 1.54 crore farmers benefited from MSP in paddy and wheat in FY21 and underlined that Rs 75,060 crore was paid to farmers for wheat in FY21 versus Rs 62,802 crore in FY20.

RAILWAYS

National Rail Plan has been created to bring a future ready Railway system by 2030. Indian Railways has prepared a national railways plan by 2030. It will bring down the logistics cost. Railways will monetize dedicated fright corridor assets for operations and maintenance after commissioning. Other railway assets are to be monetized.  The Somnagar Gomu section of Eastern Dedicated Corridor will be taken up this year. The dedicated Eastern and Western Fright corridors will be ready by 2022. According to FM, 100% electrification of broad-gauge will be completed by 2023 and Vistadome coaches in all tourist corridors. An allocation of Rs 1,10,055 crore to be made. Of this, Rs 1.07 lakh crore is for capital expenditure for FY22. The eastern and western dedicated freight corridors will be commissioned by June 2022, it was announced. The FM also announced plans for east coast corridor, east-west corridor, North- South corridors.

AIRPORT MONITISATION:

The next lot of airports will also be monetised for operations and management. AAI airports in tier-2,3 cities.

OLD VEHICLES TO UNDERGO FITNESS TEST:

FM announced a voluntary vehicle scrapping policy and said that vehicles will undergo fitness tests after 20 years for Private Vehicles, 15 years for Commercial Vehicles, announcing a voluntary vehicle scrapping policy.

POWER DISTRIBUTION

The government announced electricity connections portability to consumers by introducing competition in the power distribution space and kickstart a Rs 3 lakh crore reforms scheme for state power distribution companies. UJWALA BOOST

UJWALA SCHEME :

FM said that the free cooking gas LPG Scheme, Ujwala will be extended to one crore more beneficiaries. The city gas distribution network of providing CNG to automobiles and piped cooking gas to households will be expanded to 100 more districts.

ONE NATION ONE RATION CARD:

69 crore beneficiaries (86% beneficiaries) were covered under the One-Nation, One-Ration card implemented by 32 states and union territories.

MINIMUM WAGES:

Minimum wages will now apply to all categories of workers and women will be allowed to work in all categories with adequate protection.

MSME ALLOCATION:

The FM proposed doubling of MSME allocation, setting aside Rs 15,700 crore for medium and small enterprises in FY22.

ONE PERSON COMPANIES

Govt. plans to allow incorporation of one-person companies with no restriction on paid-up capital and turnover. Non-resident Indians will also be allowed to incorporate one-person companies in India, the FM added.

TAX HOLIDAY FOR START-UPS EXTENDED

The FM proposed extension of tax holiday for start-ups by one more year, a tax exemption for relocating funds to IFSC, and tax holiday for aircraft leasing business in Gift city.

REVISED CUSTOM DUTY STRUCTURE

Propose to review more than 400 old exemptions to customs duty, and from October 1 will put in place a revised customs duty structure free of any distortion, the FM said. Govt. plans on reducing customs duty uniformly to 7.5% on products of non-alloy, alloy and stainless steel, exempting duty on steel scrap till March 2022. The FM added that to provide relief to copper recyclers, the govt will be reducing duty on copper scrap from 5% to 2.5%.

Health and wellbeing:

• A new centrally sponsored scheme called PM Atma Nirbhar Swasthya Bharat Yojana at the outlay of Rs. 64,180 crore over six years to develop primary, secondary, and tertiary healthcare systems. This will be in addition to the National Health mission and will support 17,000 rural and 11,000 urban health care centers. Rs. 35, 000 crore has been allocated for COVID-19 vaccines, and intend to provide further funds if required. The government envisages establishing critical health care hospital blocks in 602 districts. We will launch Mission Poshan 2.0 to improve nutritional outcomes across 112 aspirational districts.
• An urban Jal Jeevan Mission to be launched and implemented over five years with an outlay of Rs 2.87 lakh crore.
• The Urban Swachh Bharat Mission will be implemented over five years.
• To tackle the burgeoning air pollution problem, I am allocating Rs. 2,217 crore for 32 urban centres, says the Finance Minister
• Focus on Swacch Bharat and swasth Bharat: “Intend to focus on reduction of single-use plastic, air pollution and segregation of waste,” FM Sitharaman says while talking about Swacch Bharat and swasth Bharat.

OTHER ANNOUNCEMENTS

• The Centre will discontinue the National Small Savings Fund loans to the Food Corporation of India and will introduce amendments to the FRBM Act on the revised fiscal path.
• A Deep Ocean Mission will be launched with an outlay of Rs 4,000 crore over five years.
• Allocation to rural infra development increased to Rs 40,000 cr in the next fiscal from Rs 30,000 crore in FY2.
• FM announces the development of 5 major fishing hubs.
• 1,000 more mandis will be integrated with the electronic national market.
• Central University to be set up in Leh Operation green scheme to cover 22 more perishable commodities.
• FM announces a special scheme for the welfare of women and children in Assam and West Bengal. Rs 1,000 crore for Bengal, Assam tea workers
• Social security benefits to be extended to gig and platform workers. Minimum wages will apply to all categories of workers and will be covered under ESIC. This will impact around 15 million gig workers in India, in addition to online platform providers across sectors such as transportation (Uber and Ola), food delivery (Swiggy and Zomato), and the contract workers in IT and software firms.
• Finance Minister Nirmala Sitharaman earmarks Rs 1,500 crore for promoting a digital mode of payment.
• Rs 300 crore to the Government of Goa for the celebration of Goa’s Liberation from Portuguese rule.
• FM announces transport system operator (TSO) for regulating common carrier capacity in gas pipelines to boost the gas-based economy.
• A scheme for promoting the flagging of merchant ships in India will be launched by providing subsidy support.
• FM announces Rs 18,000 cr scheme to augment public transport in urban areas.
• The government plans to sell part of its holding in Life Insurance Corporation of India through an initial public offering in the coming year. An amendment to the existing Act to facilitate the public offer, says FM Nirmala Sitharaman.
• More economic corridors being planned with capital expenditure at 5.54 lakh crore, from Rs 4.39 lakh crore in 2021  to boost road infrastructure.  Highway infra work proposed include building 8,500-km of highways by March 2022.  The government aims to complete 11,000 km of national highway infrastructure this year. Highway works proposed for Tamil Nadu, Kerala, West Bengal, and Assam. :
•     3,500 km corridor in Tamil Nadu
•     1,100 km in Kerala at an investment of Rs 65,000 cr
•     675 km in West Bengal at a cost of Rs 95,000 cr
•     1,300 km in Assam in the next 3 years
• NHAI has sponsored one InVit to attract investors. Thus 5 operational roads with ₹5,000 crore value being transferred to NHAI InVit. NHAI operational roll roads are to be monetised: FM.
• National Infrastructure Pipeline has been expanded to 7,400 projects. Further, projects worth ₹1.1 lakh crore have been completed under the National Infra Pipeline. We will also introduce a bill to set up DFI providing ₹20,000 crore to launch the National Asset Monetisation Pipeline to fund new infra projects: FM Sitharaman.
•    Professionally managed Development Financial Institution with Rs 27,000 crore capital.  Sitharaman also announced that she would soon table a bill on DFI essentially to fill the gap in long-term finance for infrastructure sectors.